Bank credit grew by 13.2% in financial year 2018-19 as compared to 10.3% in the previous financial year, mainly aided by loans to services and retail sector.

Deposit growth also gained momentum, growing by 10% as compared to 6.7% a year ago.

“We have to be a bit careful while looking at this data because a bump-up has happened in the month of March. If you see, up to February, credit growth was not that strong,” said Madan Sabnavis, chief economist, CARE Ratings.

Banks typically tend to push for more loan disbursement and also try to get more deposits ahead of the end of a financial year to shore up their balance sheet and meet year-end targets.

RBI data

The Reserve Bank of India’s data on deployment of gross credit across different sectors shows healthy credit growth in the services sector followed by retail sector. Credit growth in services sector till the middle of February was 23.7% and in retail sector it was 16.7%. Credit growth in the industry sector was 5.6%. “Most of these are happening in the retail segment and also services sector. Manufacturing is also better than last year but there is a base effect,” Mr. Sabnavis said.

Banks have also benefited from the liquidity crunch that non-banking financial companies are facing following the IL&FS crisis. NBFCs have slowed down their loan growth since their cost of funds increased substantially after September-October. This is particularly true for retail loans, where NBFCs are a major player.

Banks have been pushing loans to the corporate sector at a slower pace after sharp rise in bad loans, mostly in sectors like infrastructure, power, and iron and steel.